How Raising Your Car Insurance Deductible Lowers Monthly Bills
Adjusting your car insurance deductible is becoming a popular strategy for drivers looking to combat soaring premiums. According to recent data from NerdWallet, simply raising a deductible from $1,000 to $2,000 can result in immediate monthly savings. In one expert’s case, making this change on the insurer’s website took just two minutes and dropped the monthly premium from $82 to $65, saving about 21% or over $200 annually.
Average Savings Across Different Deductible Levels
With car insurance rates having surged by an average of about 30% over the past three years according to the Bureau of Labor Statistics (BLS), finding ways to save is more crucial than ever. A recent NerdWallet analysis of over 400 million insurance quotes found that increasing collision and comprehensive deductibles from $1,000 to $2,000 lowers premiums by an average of 13.5%. Raising them from $500 to $1,000 saves 12.8%, while bumping from $250 to $500 yields a 10.4% reduction.
Drivers with higher baseline rates often see even greater dollar-amount savings. For instance, a 35-year-old male driver with an accident history and lower credit score saw his monthly premium drop by $81βfrom $587 to $506βby raising his deductible from $1,000 to $2,000, amounting to $972 in yearly savings.
Important Risks to Consider Before Making the Switch
While the financial relief is attractive, experts advise caution when opting for a higher car insurance deductible. Policyholders must pay the out-of-pocket deductible amount if they file an insurance claim after an accident. Financial advisors recommend ensuring you can comfortably afford the higher out-of-pocket cost if an emergency strikes, and suggesting that drivers set aside their monthly premium savings into a dedicated emergency fund to cover the potential deductible.
